FHFA: Congress must decide future of secondary mortgage market

The Federal Housing Finance Agency yesterday submitted its annual report to Congress, as required by law, describing the actions undertaken by FHFA to carry out its statutory responsibilities, including a description of the financial safety and soundness of entities it regulates. The report describes multiple initiatives undertaken by the agency in 2021 and notes that the GSEs continue strong management of their credit, market, liquidity, and operational risks, with continued attention to strengthening their capital positions.

The report outlines recently-announced equitable housing finance plans stating that FHFA is responding to shortages in overall housing supply by ensuring that GSEs finance existing affordable housing stock, enabling homes in disrepair to be rehabilitated, and supporting the growth the nation’s housing supply.

The report calls on Congress to “determine the structure of [Fannie Mae and Freddie Mac] and the secondary mortgage market for the post-conservatorship world.” Among the issues under Congress’ purview include changes to the enterprises’ charter acts, adjustments to their statutory business model, creation of reserves funded by GSE guarantee fees and the ability to charter new enterprises, the agency said.

In addition to congressional action, FHFA noted that the Treasury Department will also “need to resolve a series of outstanding issues” before the conservatorships end. “In the meantime, the agency will focus on building the enterprises’ capital reserves and improving their safety and soundness,” the report said.

FHFA also asked Congress to grant it the authority to examine third-party service providers to identify practices that could pose safety and soundness risks to Fannie Mae and Freddie Mac. A similar request was also made under former FHFA Director Mark Calabria and was previously recommended by both the Government Accountability Office and FHFA’s inspector general. FHFA also requested greater flexibility with regard to enterprise regulatory capital.


About Author

Monica C. Meinert is a senior editor at the ABA Banking Journal and VP for editorial strategy at the American Bankers Association, where she oversees ABA Daily Newsbytes.